Stamp duty hike may backfire on Donohoe

Cantillon: Early indicators suggest tripling of duty will not yield targeted amount

Minister for Finance  Paschal Donohoe: will struggle to raise an additional €375 million in tax revenue from the higher 6 per cent rate of commercial stamp duty brought  in Budget 2018. Photograph: Dara Mac Donaill

Minister for Finance Paschal Donohoe: will struggle to raise an additional €375 million in tax revenue from the higher 6 per cent rate of commercial stamp duty brought in Budget 2018. Photograph: Dara Mac Donaill

 

Early indicators suggest Minister for Finance Paschal Donohoe will struggle to raise an additional €375 million in tax revenue from the higher 6 per cent rate of commercial stamp duty brought in, to the industry’s considerable annoyance, in Budget 2018.

Industry bodies have long maintained the Department of Finance’s projections are based on the €9.4 billion worth of transactions seen in 2016 which, they claim, was a once-off, delivered on the back of a massive programme of deleveraging by Nama and the banks, which saw most of the State’s shopping centres change hands.

Recent exchequer returns for March, published this week, seem to support their claims. They show tax revenue from stamp duty is already below profile by 12 per cent or €40 million, coming in at €302 million for the three-month period.

At first glance, the figure seems out of kilter with separate numbers from property consultants CBRE, which reveal almost €930 million was invested in commercial property here in the same period, nearly twice the value of sales recorded for the same period last year.

Quarterly numbers

However, CBRE cautioned about reading too much into its quarterly numbers, while noting the first quarter number was boosted by three large transaction worth over €100 million.

“The total for 2017 was about €2.5 billion so it is encouraging that we have €929 million signed worth of transactions by the end of March this year,” said CBRE’s Marie Hunt. “With regard to the stamp duty issue, my comment is as before that, in my opinion, the estimates for overall investment spend and therefore stamp duty yield from commercial transactions appears to have been based on the extraordinary volumes of transactional activity recorded in the market in 2014-2016, which was exceptional because of the volume of deleveraging going on in those years.”

The point being – now that we’re back at more normalised level of trading in the Irish commercial property market – the yield from stamp duty won’t be as high as the Government projects.